Question 1

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Accepted Answer

A) $0 
B) $4,000 
C) $7,000 
D) none of the above

Question 2

The XYZ Partnership owns the following assets on December 31: $$\begin{array} { | l | r | r | } 
\hline & { \text { Basis } } &{ \text { FMV } } \
\hline \text { Cash } & \$ 10,000 & \$ 10,000 \
\hline \text { Unrealized receivables } & 0 & 10,000 \
\hline \text { Inventory } & \$ 25,000 & 30,000 \
\hline
\end{array}$$ A partner has a 20% interest with a basis of $6,000 in XYZ before receiving a liquidating distribution of $10,000 cash.XYZ Partnership has no liabilities.His recognized gain is

Accepted Answer

A) $4,000 capital gain. 
B) $3,000 capital gain and $1,000 ordinary income. 
C) $3,000 ordinary income. 
D) $3,000 ordinary income and $1,000 capital gain.

Question 3

Identify which of the following statements is true.

Accepted Answer

A) The basis for property distributed by a partnership cannot be increased above the carryover basis amount when it is received by a partner in a nonliquidating distribution. 
B) A partner's partnership capital account balance cannot be less than zero. 
C) The length of time a partner owns a partnership interest is relevant when determining the holding period for distributed property. 
D) All of the above are false.

Question 4

Identify which of the following statements is false.

Accepted Answer

A) A sale or exchange of at least 50% of the capital and profits interest in a partnership within a 12- consecutive-month period will terminate the partnership and end all of the partnership's elections. 
B) When using the 50% rule to terminate a partnership,if an interest is sold more than once during the 12-month period,each sale is counted separately. 
C) A partner's individual income tax return,under some circumstances,may include the results of partnership operations for a period exceeding 12-months. 
D) When several different transfers are made during a 12-month period,the partnership termination occurs on the date of the transfer that first crosses the 50% threshold.

Question 5

Identify which of the following statements is false.

Accepted Answer

A) On June 30 of the current year,James Roe sells his interest in the Roe & Doe Partnership for $30,000.Roe's adjusted basis in Roe & Doe at June 30 is $7,500 before apportionment of any partnership income for the current year.The Roe & Doe Partnership uses the calendar year as its tax year and has no liabilities on June 30.Roe's distributive share of partnership income up to June 30 is $22,500.Roe acquired his interest in the partnership five years ago.Roe will have a long-term capital gain on the sale of his interest of $22,500. 
B) Section 751 assets include all inventory and all unrealized receivables in a sale or exchange situation. 
C) When a partnership interest is sold,the buyer and seller can allocate the sale price among the Sec.751 assets and non-Sec.751 assets in any reasonable manner. 
D) Statements B and C are true.

Question 6

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Accepted Answer

A) True 
 B)False

Question 7

Identify which of the following statements is true.

Accepted Answer

A) Under the check-the-box rules,an LLC with more than one member is taxed as a corporation unless it elects to be taxed as a partnership. 
B) The partnership's tax year closes with respect to a partner whose interest is transferred by gift. 
C) An LLC has been taxed as a partnership for five years.Under the check-the-box rules,the LLC makes a timely election in 2019 to be taxed as a C corporation.The election of C corporation status is permitted and results in the LLC's assets being transferred from a partnership to a C corporation under the federal income tax rules. 
D) All of the above are false.

Question 8

Identify which of the following statements is true.

Accepted Answer

A) On December 31 of the current year,Max Curcio's adjusted basis for his interest in the Maduro & Motta Partnership is $36,000.Maduro & Motta distributes cash of $6,000 and a parcel of land held as an investment to Curcio in liquidation of his entire interest in the partnership.The land has an adjusted basis of $18,000 to the partnership and an FMV of $42,000.Curcio's basis in the land is $18,000. 
B) Jake has a basis in his partnership interest of $40,000 before receiving a liquidating distribution of $5,000 cash,inventory with a basis of $4,000 and an FMV of $5,000,and land with a basis of $3,000 and an FMV of $6,000.Jake will receive no further distributions.He can recognize a loss of $28,000 at the time the liquidating distribution is received. 
C) A partner's holding period for a partnership interest is never considered when determining the holding period for property distributed in a liquidating distribution. 
D) All of the above are false.

Question 9

The definition of "unrealized receivable" does not include the

Accepted Answer

A) right to payment for services performed by a cash-basis taxpayer. 
B) recapture potential on Sec.1245 property. 
C) recapture potential on Sec.1250 property. 
D) right to payment for services performed by an accrual-basis taxpayer.

Question 10

Helmut contributed land with a basis of $5,000 and an FMV of $10,000 to the HG Partnership five years ago to acquire a 50% partnership interest.This year the land is distributed to another partner,Gail,when its FMV is $11,000.No other distributions have been made since Helmut became a partner.When the land is distributed to Gail,Helmut recognizes a gain of

Accepted Answer

A) $0. 
B) $2,500. 
C) $3,000. 
D) $5,000.

Question 11

Mirabelle contributed land with a $5,000 basis and a $9,000 FMV to MS Partnership four years ago.This year the land is distributed to Sergio,another partner in the partnership.At the time of distribution,the land had a $12,000 FMV.What is the impact of the distribution on Mirabelle's partnership basis?

Accepted Answer

A) 0 
B) $4,000 increase 
C) $4,000 decrease 
D) $7,000 increase

Question 12

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Accepted Answer

A) True 
 B)False

Question 13

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

Accepted Answer

A) $0 
B) $150,000 increase in Han's basis in his partnership interest 
C) $200,000 increase in Han's share of the basis in partnership assets 
D) $1,000,000 increase in partnership assets

Question 14

Steve sells his 20% partnership interest having a $28,000 basis to Nancy for $40,000 cash.At the time of the sale,the partnership has no liabilities and its assets are as follows: $$\begin{array} { | l | r | r | } 
\hline & \text { Basis } & { \text { FMV } } \
\hline \text { Cash } & \$ 20,000 & \$ 20,000 \
\hline \text { Unrealized receivables } & 0 & 40,000 \
\hline \text { Inventory } & 10,000 & 40,000 \
\hline \text { Land (Sec. 1231) } & 110,000 & 100,00 \
\hline
\end{array}$$ The receivables and inventory are Sec.751 assets.There is no agreement concerning the allocation of the sales price.Steve must recognize

Accepted Answer

A) no gain or loss. 
B) $12,000 ordinary income. 
C) $12,000 capital gain. 
D) $14,000 ordinary income and $2,000 capital loss.

Question 15

A partnership cannot recognize a gain or loss on a current distribution.

Accepted Answer

A) True 
 B)False

Question 16

The LM Partnership terminates for tax purposes on July 15 when Latasha sells her 60% capital and profits interest to Zoe for $100,000.The partnership has no liabilities,and its assets at the time of termination are as follows: $$\begin{array} { | r | r | r | } 
\hline \text { Assets } &{ \text { Basis } } & { \text { FMV } } \
\hline \text { Cash } & \$ 20,000 & \$ 20,000 \
\hline \text { Receivables } & 10,000 & 12,000 \
\hline \text { Inventory } & 22,000 & 28,000 \
\hline \text { Building } & 80,000 & 85,000 \
\hline \text { Land } & 30,000 & 21,667 \
\hline \text { Total } & \$ 162,000 & \$ 166,667 \
\hline
\end{array}$$ Marika,a 40% partner in the LM Partnership,has a $64,800 basis in her partnership interest (outside basis)at the time of the termination.She has held her LM Partnership interest for three years at the time of the termination.The basis of Marika and Zoe in the new LM Partnership is:

Accepted Answer

A)  $$\begin{array} { | l | l | } 
\hline \text { Marika } & \text { Zoe } \
\hline \$ 64,800 & \$ 97,200 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | } 
\hline \text { Marika } & \text { Zoe } \
\hline \$ 66,667 & \$ 100,000 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | } 
\hline \text { Marika } & \text { Zoe } \
\hline \$ 64,800 & \$ 100,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | } 
\hline \text { Marika } & \text { Zoe } \
\hline \$ 66,667 & \$ 97,200 \
\hline
\end{array}$$

Question 17

Identify which of the following statements is true.

Accepted Answer

A) A liquidating distribution that terminates a partnership interest cannot include more than one distribution. 
B) A partnership with a large amount of unrealized receivables and substantially appreciated inventory items liquidated and distributed all of its assets in kind to each partner in proportion to their partnership interests.Each partner will report ordinary income at the time these assets are received equal to their FMV. 
C) The rule for recognizing gain on a liquidating distribution is the same rule that is used for a current distribution. 
D) All of the above are false.

Question 18

The STU Partnership,an electing Large Partnership,has no passive activities and reports the following transactions for the year: net long-term capital losses $50,000,Sec.1231 gain $60,000,ordinary income $20,000,charitable contributions $15,000,and tax-exempt income $2,000.How much will be reported as ordinary income to its partners?

Accepted Answer

A) $5,000 
B) $17,000 
C) $20,000 
D) $22,000

Question 19

A new partner,Gary,contributes cash and assumes a share of partnership liabilities.Diane's capital,profits,and loss interest in the partnership is reduced by 5% due to the admission of Gary.The Sec.751 rules do not apply.Partnership liabilities at the time Gary is admitted are $200,000,and all of the liabilities are recourse debts for which the partners share the economic risk of loss in the same way they share partnership profits.Diane's basis in the partnership interest prior to Gary's admission is $5,000.Due to the admission of Gary,partner Diane has

Accepted Answer

A) no recognized gain or loss and a partnership interest basis of $10,000. 
B) no recognized gain or loss. 
C) a recognized gain of $5,000 and a partnership interest basis of zero. 
D) a recognized gain of $5,000 and a partnership interest basis of $5,000.

Question 20

Tenika has a $10,000 basis in her interest in the TF Partnership and no remaining precontribution gain immediately before receiving a current distribution that consisted of $4,000 in money,plastic tubes held in inventory with a $3,000 basis to the partnership and an FMV of $3,375,and drip irrigation pipe held as inventory with a $6,000 basis to the partnership and an FMV of $5,000.What is the basis in Tenika's hands of the distributed property?

Accepted Answer

A) $10,000 
B) $6,000 
C) $9,000 
D) $10,125

Exam 10: Special Partnership Issues

Danielle has a basis in her partnership interest of $12,000.She receives a current distribution of $8,000 cash and equipment with a basis of $7,000.There is no potential gain under Sec.737.What is her basis in the equipment?

Identify which of the following statements is true.

Identify which of the following statements is false.

Identify which of the following statements is false.

A limited liability company is a form of business entity that combines the legal benefits of the corporate form with the tax benefits of the partnership form.

Identify which of the following statements is true.

Identify which of the following statements is true.

The definition of "unrealized receivable" does not include the

In a current distribution,the partner's basis in the partnership interest is reduced by the amount of money received and by the partnership's bases in the distributed property.

Han purchases a 25% interest in the CHOP Partnership from Huang for $600,000.The partnership has assets with a basis of $1,600,000.What is the amount of the basis adjustment,if the partnership has a 754 election in place?

A partnership cannot recognize a gain or loss on a current distribution.

Identify which of the following statements is true.